Volumes peak on Tel Aviv Stock Exchange

Tension in Israel is rising on almost every front, and leaving its mark on the stock exchange. The IDF has resumed intensive operations in the Gaza Strip, and rocket fire on Israel has begun again, while on the political and legal plane, the government’s attempts to dismiss Shin Bet chief Ronen Bar and Attorney General Gali Baharav-Miara have led to renewed ferment and political polarization in the country. Threats by business leaders and the Histadrut to shut down the economy led to a 3% drop in the Tel Aviv 35 Index on Sunday. In fact, however, even before the storm broke, life was interesting on the local stock market.

In recent weeks, in fact since the beginning of 2025, the Tel Aviv Stock Exchange has observed a new trend: an almost unprecedented jump in trading volumes. Last Thursday, for example, turnover was NIS 3.6 billion, more than 50% higher than the average daily turnover last year. The stock exchange estimates that average daily turnover in March will surpass NIS 2.5 billion, after reaching NIS 2.6 billion in January and NIS 2.8 billion in February. For the first quarter as a whole, the daily average is NIS 2.6 billion, 20% more than the daily average for last year.

Leading sectors

Data from the Tel Aviv Stock Exchange show that the largest jump in turnover has been in the insurance sector. Until the sharp falls at the beginning of this week, the sectoral index gave a twelve-month return of over 70%. Daily turnover in insurance company stocks rose to NIS 125 million in the past month, almost 60% above the daily average in the previous twelve months.

Bank shares, which gave an impressive 60% return last year, have seen a 42% rise in average daily turnover, to NIS 618 million in the past month. In Tel Aviv 35 Index stocks, which rose more than 20% last year, the average daily turnover was NIS 1.5 billion in the past month, 37% more than last year (NIS 1.1 billion).

It is not only financial services stocks that have attracted high volumes of trading. For Tel Aviv Industrials Index stocks, which include large companies such as Teva and ICL, average daily turnover was NIS 617 million in the past month, 39% more than last year. Average daily turnover in Tel Aviv Technology Index stocks was NIS 538 million, 35% more than last year.

“The volume of trading on the Tel Aviv Stock Exchange recently is at a peak I’ve never seen,” says the exchange’s EVP and head of trading, indexes and derivatives Yaniv Pagot. “Just since the start of the year, NIS 1.5 billion have flowed into assets that track the Tel Aviv 125 Index.” Pagot adds that there has been a revival in the derivatives market as well, and also in smaller cap stocks in the second tier (Tel Aviv 90 Index) and third tier (Tel Aviv SME 60 Index).

Why is this happening? Pagot: “It’s a combination of under-investment in the local market in the past two years, because of a massive shift of money into investment in the S&P 500 Index and money market funds, and the local market’s very positive performance in the past year. In recent months, investors have apparently wanted to diversify their portfolios with more Israeli stocks, and foreign investors have also returned, although not at full strength.

“The financial institutions, which manage the public’s savings, and which were also under-invested in the local market in comparison with their investments overseas, have raised their exposure to it.” The jitters on Wall Street caused by President Trump’s tariff measures and the fear of a slowdown in the world’s largest economy have led to declines in the main stock indices there. The Nasdaq is down 8% so far this year, while the S&P 500 has lost 3.5%. By contrast, the Tel Aviv 35 Index, even after the falls at the beginning of this week, is still up 1% for the year to date.

Will the trend continue?

Trading volumes in Tel Aviv are at a historical high. Daily turnover in equities averaged NIS 1.4 billion in the period 2011-2022. In 2022, which was a difficult year for investors, with the rise in interest rates and the outbreak of war in Ukraine, average daily turnover was NIS 2.3 billion. It fell to NIS 2 billion in 2023, impacted by the struggle over the government’s judicial overhaul program and the outbreak of war in Israel. Last year, as the security picture became clearer, average daily turnover rose to NIS 2.2 billion, and in recent months it has broken records.

Rami Dror, CEO of Value Advanced Investments Group, says, “In 2023, we saw a massive exit of investors, as financial institutions and foreign investors diverted money away from the Israeli market. In recent months, particularly after the exploding pagers operation in Lebanon in September and the US elections in November, there has been hope here of an end to the war, and so we saw the institutions raising their holdings in the local market.

“The public also sensed a change in the trend. We began to get back to sanity, even euphoria, after the elections in the US. Today, we are after that peak, and, looking ahead, I don’t think we’ll see trading volumes continuing to grow at the same rate. The fear of a return of the judicial overhaul program here is giving investors a sense of déj?à-vu.”

It’s not just politics

Lior Alagem, director of securities research at Discount Bank, believes that the rise in volumes stemmed from the market’s good performance in the wake of the improvement in the security situation. “When the market’s good and rising, volumes naturally grow. Another reason, which is more significant for the future, is the US market. Recent events there, mainly President Trump’s tariffs policy towards the rest of the world, are causing some investors to shift their money, mainly to European stock markets. The money exiting the US stock market also reaches the Israeli market. We therefore think that the growth in volumes is not something permanent. We’d be happy to see that happen, but it’s hard for us to be too optimistic in that respect.”

Will the current political drama in Israel affect trading volumes? Discount Bank cautiously estimates that the market has found an “excuse” for profit taking: “The price levels that the market reached are price levels that invite selling. It’s hard to connect it to politics after a day or two. As long as nothing very dramatic happens, we don’t want to make that connection. But we’re aware that, either way, the market is ripe for a correction.”

Published by Globes, Israel business news – en.globes.co.il – on March 25, 2025.

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